There are two types of arbitration: binding and non-binding.
In binding arbitration, the parties are required to comply with the ruling of the arbitrator.
Meanwhile, in non-binding arbitration, the arbitrator's ruling is simply a recommendation on how best to resolve the dispute.
In cases that would otherwise go to trial, arbitration is most likely to be binding. The arbitrator acts in place a judge to set an amount for damages, and the losing party must pay that amount or be subject to litigation.
Non-binding arbitration is more common in labor and other disputes where a monetary judgment is not set, but rather a decision on how to proceed with a dispute.